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Government strategy creating ‘perfect storm’ for low-income groups

The government’s austerity strategy is disproportionately hurting those on the lowest incomes, according to an Oxfam report. It describes a ‘perfect storm’ of factors – increasing unemployment, a lack of decent jobs, rising living costs, falling incomes and deep cuts to welfare and public services – hitting the most vulnerable people, both in and out of work.

The report combines an analysis of the recession’s effects with a series of policy recommendations.

Main points

Despite the government’s ‘rhetoric’ about making work pay, having a job is no longer necessarily enough to lift someone out of poverty – more working-age adults in poverty now live in working households than in workless ones.

People on benefits, whether in or out of work, are increasingly turning to charities for help – with thousands more accessing food banks.

There are an estimated 2 million ‘vulnerable workers’ – people whose work is characterised by insecurity, uncertainty over hours and low pay. The UK has the highest number of ‘zero-hours’ contracts in Europe.

One knock-on effect is that the number of people in work but having to claim housing benefit has more than doubled during the recession, to nearly 900,000.

The government should reverse cuts to working tax credits; increase the minimum wage; and reduce the marginal deduction rate from 65 per cent to 55 per cent of the new universal credit when people start a job or increase their income.

The government should also make sure no further welfare cuts are introduced that disproportionately affect those in the greatest poverty; reduce cuts to public services and increase progressive taxation instead; protect people living in poverty from high energy prices; and introduce a maximum level of interest lenders can charge to people in debt.

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PSE:UK is a major collaboration between the University of Bristol, Heriot-Watt University, The Open University, Queen's University Belfast, University of Glasgow and the University of York working with the National Centre for Social Research and the Northern Ireland Statistics and Research Agency. ESRC Grant RES-060-25-0052.